Oil and gas survey highlights the challenges of a labour market-placeDate: Thursday, January 07, 2010 @ 10:00:00 ESTTopic: GENERAL NEWS

An independent oil and gas survey reveals a rising confidence in the sector, particularly within the contractor community looking towards opportunities in international markets. It also highlights how the industry is coping with a changing dynamic in the labour market-place as it continues to grapple with price volatility, the global financial downturn, uncertain demand and curtailed or delayed investment.

The 11th Aberdeen & Grampian Chamber of Commerce Oil and Gas Survey, sponsored by McGrigors and conducted by the Fraser of Allander Institute at the University of Strathclyde, draws on responses from oil and gas operators and contractors to identify trends including activity levels, skills supply and contractual matters, investment, and new market developments. The findings are used to identify how the performance of this sector might impact on the wider business community in North-east Scotland and the rest of the UK.

The report reflects rising business confidence looking towards 2010 and supports recent Scottish and UK business surveys suggesting a likely re-emergence of economic growth in the third and fourth quarters. Skills shortages, a feature of previous years have eased, although this may well be due to a combination of reduced demand and a number of industry wide initiatives. Nevertheless, shortages in specific skills and recruitment difficulties were again reported, although not to the same extent as in previous surveys.

Robert Collier, Chamber Chief Executive explains: "The change in business confidence is more marked in the international context which may have an up as well as a down side. The export of skills and products is good, but we must ensure that fiscal policy also encourages the industry to remain firmly anchored to the UKCS.

"In many ways, the information about employment trends contained in the report is the most intriguing. Firms continue to recruit in this recession which is in marked contrast to the big dips in recruitment which were reported in the surveys we produced in 1999 and 2004. Whether this is for replacing staff (60%) or for additional staff (40%), the industry appears to have avoided the trap of losing valuable talent this time round. It will be critical that the UKCS retains core skills in the upturn.

Robert concluded: "At this time, it seems to be temporary and contract staff that have borne the brunt of any "right-sizing" by the industry. Operators intend to recruit contract staff going forward, no doubt to improve the flexibility of their industry, and this trend is expected to continue. In terms of pay awards, less than half reported increasing pay in 2009, and the average increase was almost half that reported in 2007, and a number reported pay reductions."

McGrigors Head of Energy, Bob Ruddiman, said: "The report suggests the industry has tackled the recession better than many other sectors. Whilst employment levels and limited pay awards are indicative of significant belt tightening and a certain lack of optimism, we are not seeing wholescale redundancy programmes."

"The industry appears to have learned lessons from previous downturns and has been mindful of the need to have a skilled workforce to capitalise on future opportunity."

"The UK oil and gas industry offers the economy a dual benefit of maximising our indigenous hydrocarbon potential whilst also being a key exporter. The politicians have a duty to ensure we have a fiscal environment which encourages this and an energy policy which transcends political boundaries and has a vision beyond the next term of Parliament."

Summary of key survey findings

• The UKCS and the global oil sector are in a period of declining investment, re-assessment of projects and heightened concerns as to costs.
• Activity in the UKCS, at least in the short term, has been reduced and business confidence remains frail and, whilst the recent improvement of the oil price has been welcomed, wholesale gas prices have remained depressed.
• The proportion of contractors reporting working at or above optimum levels in the UKCS eased to the lowest levels recorded by the survey, although some improvement is anticipated for 2010.
• Recruitment activity remained widespread, although this was mainly to replace rather than increase staff.
• Skill shortages, a feature of previous years have eased, although this may well be due to a combination of reduced demand and a number of industry-wide initiatives. Nevertheless, skills shortages and recruitment difficulties were again reported, although not to the same extent as in previous years.
• The average pay increase in 2009 eased to the levels reported in 2004, and the percentage reporting increasing pay was lower than in previous years. There was evidence of pay freezes and rate reductions, the ending of bonus payments and some reductions in terms and conditions.
• The main sources of staff continued to be other oil and related companies in the UKCS.
• Over the next three years, the majority of operators expect to reduce staff - in contrast, 50% of contractors expect to increase staff.

Full Report

A copy of the full report can be seen on the Aberdeen & Grampian Chamber of Commerce website at: www.agcc.co.uk